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Energy and Economic Growth Author info | Abstract | Publisher info | Download info | Related research | Statistics David I. Stern () (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)
Cutler J. Cleveland () (Department of Geography and Center for Energy and Environmental Studies, Boston University, Boston, MA 02215, USA)
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Physical theory shows that energy is necessary for economic production and therefore growth but the mainstream theory of economic growth, except for specialized resource economics models, pays no attention to the role of energy. This paper reviews the relevant biophysical theory, mainstream and resource economics models of growth, the critiques of mainstream models, and the various mechanisms that can weaken the links between energy and growth. Finally we review the empirical literature that finds that energy used per unit of economic output has declined, but that this is to a large extent due to a shift from poorer quality fuels such as coal to the use of higher quality fuels, and especially electricity. Furthermore, time series analysis shows that energy and GDP cointegrate and energy use Granger causes GDP when additional variables such as energy prices or other production inputs are included. As a result, prospects for further large reductions in energy intensity seem limited.
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Paper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number
0410.
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Find related papers by JEL classification: Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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Rehana Siddiqui, 2004.
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